Fitch puts OCBC on negative watch after Wing Hang deal

Credit rating agency Fitch Ratings has placed Oversea-Chinese Banking Corp, Southeast Asia's second-largest lender, on negative watch, citing higher potential exposure to China, after the bank announced a HK$38.4 billion takeover of Hong Kong's Wing Hang Bank.

"The [negative rating watch] reflects Fitch's expectations that the acquisition of Wing Hang will increase OCBC's exposure to China, where credit and operating risk is higher than in OCBC's home market of Singapore," Fitch said. "This could potentially lead to deterioration in OCBC's credit profile."

The negative watch was assigned to the bank's long-term and short-term issuer default ratings and viability rating.

OCBC said on Tuesday that it was eyeing the increasing investment and trade flows between Southeast Asia and China.

The bank, which has 17 branches on the mainland and in Hong Kong, acquired Wing Hang, the eighth-largest lender in Hong Kong with 42 branches in the city, 15 on the mainland and 13 in Macau.

Moody's Investors Service also placed OCBC on review for a downgrade, saying the transaction would reduce the bank's capital and there would be risks involved in efforts to replenish it.